After snagging another $300 million from Tiger Global and Ontario Teachers Retirement Fund, 360buy is now valued at some $7.6 billion. That’s up from $6.6 billion a year ago, when Digital Sky Technologies, Sequoia Capital, Tiger and the family controlling Wal-Mart injected capital, despite speculation among VCs in China that Jingdong would struggle to raise money at a higher value.

Trouble is, more money is likely to lead to more promotions. Heated competition and widespread discounting by new entrants pushed early comers, such as Dangdang DANG.N, into the red. Analysts don’t expect the online bookseller to turn a profit until 2015. Jingdong’s loss is expected to widen in 2012 to $300 million as it strives to triple its sales and catch up with Alibaba’s Tmall. Online clothier Vancl’s goal to become profitable in the fourth quarter still looks a tall order.

New arrivals in recent years have led to more frenzied competition. Amazon (AMZN.O) and Wal-Mart (WMT.N) have both invested in local players. Even eBay (EBAY.O) is mulling a return to the Middle Kingdom, inking a recent partnership with domestic luxury goods site Xiu. Meanwhile, domestic electronics chains Suning (002024.SZ) and Gome (0493.HK), as well as China’s most valuable Internet firm Tencent, have launched their own online shopping sites.

Alibaba, thanks to its first-mover advantage, still leads the pack. Its Tmall and Taobao sites saw $3 billion combined sales in just 24 hours on Nov. 11. That makes their “Double Eleven” sales worth more than double America’s entire “Cyber Monday” shopping spree, which brought in $1.3 billion in 2011, according to ComScore.

The market’s growth makes it alluring. Last year, e-commerce volumes in China rose 29 percent year-on-year to almost $1 trillion, or 13 percent of GDP, as generous investments like 360buy’s have enabled uncompetitive players to tough it out. 360buy’s existing investors, along with its promotion-addicted customers, may cheer another up-round. But at some point the industry must learn to support itself beyond equity capital.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:

www.breakingviews.com/TOPNewsSubscription

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

CONTEXT NEWS

- Jingdong Mall, which runs online shopping site 360buy.com, closed a fourth round of funding last week, raising $300 million of new investment from Tiger Global Management and Ontario Teachers Retirement Fund. The company is valued at $7.6 billion, according to people close to the transaction.

- In April 2011, Jingdong raised $1 billion from Digital Sky Technologies, Sequoia Capital, Tiger and the Walton family, allowing a valuation of $6.6 billion post money, said the sources. At the time, Chinese media had widely reported DST invested $500 million for a 5 percent stake, implying a valuation of $10 billion.

C Reuters 2012. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing, or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.